Governance and Shareholder Response to Appointment of a Chief Risk Officer

The Geneva Papers, Vol. 37, pp. 108-124, 2012

36 Pages Posted: 22 Mar 2012 Last revised: 13 Apr 2012

See all articles by Puneet Prakash

Puneet Prakash

Missouri State University

Manu Gupta

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate

Nanda K. Rangan

Virginia Commonwealth University

Date Written: March 22, 2012

Abstract

This study examines the recent, significant growth in the appointment of CROs, the role of the CRO, and whether such appointments benefit shareholders. We find that the market is more likely to react positively to an appointment of a CRO the weaker a firm’s corporate governance. In particular, lower the proportion of outside directors the greater is the likelihood of a positive market reaction to the appointment of a CRO, suggesting the shareholders associate the position with better future governance. Finally, firms with higher tax and product risk also experience increases in stock prices when they appoint CROs.

Keywords: Risk management, ERM, governance, Chief Risk Officer

JEL Classification: G30, G20, G14

Suggested Citation

Prakash, Puneet and Gupta, Manu and Rangan, Nanda K., Governance and Shareholder Response to Appointment of a Chief Risk Officer (March 22, 2012). The Geneva Papers, Vol. 37, pp. 108-124, 2012 , Available at SSRN: https://ssrn.com/abstract=2027677

Puneet Prakash (Contact Author)

Missouri State University ( email )

United States
65897 (Fax)

Manu Gupta

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate ( email )

Richmond, VA 23284
United States

Nanda K. Rangan

Virginia Commonwealth University ( email )

2400 East Cary Street, Suite # 400
Richmond, VA 23223
United States
8048277410 (Phone)

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